IRB 2015-11 (Rev. March 16, 2015) - Internal Revenue Service · Bulletin No. 2015–11 March 16,...

HIGHLIGHTSOF THIS ISSUEThese synopses are intended only as aids to the reader inidentifying the subject matter covered. They may not berelied upon as authoritative interpretations.

INCOME TAX

REG–136018–13, page 759.These proposed regulations provide the method to be used toadjust the applicable Federal rates under section 1288 fortax-exempt obligations and the method to be used to determinethe long-term tax-exempt rate and the adjusted Federal long-term rate under section 382.

T.D. 9712, page 750.The final regulations allow a taxpayer to elect the alternativesimplified credit for a tax year on an amended return.

EMPLOYEE PLANS

Announcement 2015–1, page 758.This announcement describes changes to the processing ofemployee plans determination letters that will take effect in2015. These changes are being adopted as a result of aprocess improvement strategy designed to promote case pro-cessing efficiency. The changes to the determination letterprocedures described in this announcement will be reflected inRev. Proc. 2015–6, which will be published in IRB 2015–1 andbe effective on February 1, 2015.

Rev. Proc. 2015–22, page 754.This revenue procedure contains a modification to RevenueProcedure 2013–22, 2013–18 I.R.B. 985, as modified byRevenue Procedure 2014–28, 2014–16 I.R.B. 944, and mod-ifications to Revenue Procedure 2015–8, 2015–1 I.R.B. 235.In particular, this revenue procedure changes the addresses towhich applications for opinion and advisory letters for § 403(b)pre-approved plans should be submitted and inserts a user feethat was omitted from Rev. Proc. 2015–8.

EXEMPT ORGANIZATIONS

Announcement 2015–10, page 758.Revocation of IRC 501(c)(3) Organizations for failure to meetthe code section requirements. Contributions made to theorganizations by individual donors are no longer deductibleunder IRC 170(b)(1)(A).

EXCISE TAX

REG–143416–14, page 757.The temporary and proposed regulations provide rules for thedefinition of a covered entity for purposes of the fee imposedby section 9010 of the Patient Protection and Affordable CareAct, as amended. The temporary and proposed regulations arenecessary to clarify certain terms in section 9010.

T.D. 9711, page 748.The temporary and proposed regulations provide rules for thedefinition of a covered entity for purposes of the fee imposedby section 9010 of the Patient Protection and Affordable CareAct, as amended. The temporary and proposed regulations arenecessary to clarify certain terms in section 9010.

(Continued on the next page)

Finding Lists begin on page ii.

Bulletin No. 2015–11March 16, 2015

ADMINISTRATIVE

Notice 2015–20, page 754.This notice updates the appendix to Notice 2013–1, which liststhe Indian tribes who have settled tribal trust cases against theUnited States. Notice 2012–60 originally was published in IRB2012–41 (October 9, 2012). Notice 2012–60 was super-ceded by Notice 2013–1 IRB 2013–3, and the appendix toNotice 2013–1 was superceded by Notice 2013–16 (IRB2013–14), then Notice 2013–36, then Notice 2013–55, thenNotice 2014–22, Notice 2014–38, and then Notice 2014–61. However, one additional tribe has settled a case againstthe United States since the publication of Notice 2014–61, sowe are seeking to publish an updated appendix to Notice2013–1. This notice would supercede Notice 2014–61.

The IRS MissionProvide America’s taxpayers top-quality service by helpingthem understand and meet their tax responsibilities and en-force the law with integrity and fairness to all.

IntroductionThe Internal Revenue Bulletin is the authoritative instrument ofthe Commissioner of Internal Revenue for announcing officialrulings and procedures of the Internal Revenue Service and forpublishing Treasury Decisions, Executive Orders, Tax Conven-tions, legislation, court decisions, and other items of generalinterest. It is published weekly.

It is the policy of the Service to publish in the Bulletin allsubstantive rulings necessary to promote a uniform applicationof the tax laws, including all rulings that supersede, revoke,modify, or amend any of those previously published in theBulletin. All published rulings apply retroactively unless other-wise indicated. Procedures relating solely to matters of internalmanagement are not published; however, statements of inter-nal practices and procedures that affect the rights and dutiesof taxpayers are published.

Revenue rulings represent the conclusions of the Service onthe application of the law to the pivotal facts stated in therevenue ruling. In those based on positions taken in rulings totaxpayers or technical advice to Service field offices, identify-ing details and information of a confidential nature are deletedto prevent unwarranted invasions of privacy and to comply withstatutory requirements.

Rulings and procedures reported in the Bulletin do not have theforce and effect of Treasury Department Regulations, but theymay be used as precedents. Unpublished rulings will not berelied on, used, or cited as precedents by Service personnel inthe disposition of other cases. In applying published rulings andprocedures, the effect of subsequent legislation, regulations,court decisions, rulings, and procedures must be considered,and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unlessthe facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.This part includes rulings and decisions based on provisions ofthe Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.This part is divided into two subparts as follows: Subpart A, TaxConventions and Other Related Items, and Subpart B, Legisla-tion and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.To the extent practicable, pertinent cross references to thesesubjects are contained in the other Parts and Subparts. Alsoincluded in this part are Bank Secrecy Act Administrative Rul-ings. Bank Secrecy Act Administrative Rulings are issued bythe Department of the Treasury’s Office of the Assistant Sec-retary (Enforcement).

Part IV.—Items of General Interest.This part includes notices of proposed rulemakings, disbar-ment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index forthe matters published during the preceding months. Thesemonthly indexes are cumulated on a semiannual basis, and arepublished in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

March 16, 2015 Bulletin No. 2015–11

Part I. Rulings and Decisions Under the Internal Revenue Codeof 198626 CFR 57.2T Explanation of Terms.

T.D. 9711

DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 57

Health Insurance ProvidersFee

AGENCY: Internal Revenue Service (IRS),Treasury.

ACTION: Final and temporary regulations.

SUMMARY: This document containstemporary regulations that provide rulesfor the definition of a covered entity forpurposes of the fee imposed by section9010 of the Patient Protection and Afford-able Care Act, as amended. The tempo-rary regulations are necessary to clarifycertain terms in section 9010. The tempo-rary regulations affect persons engaged inthe business of providing health insurancefor United States health risks. The text ofthe temporary regulations also serves asthe text of the proposed regulations(REG–143416–14) published in the Pro-posed Rules section in this issue of theFederal Register.

DATES: Effective Date: These regula-tions are effective on February 26, 2015.

Applicability Date: For dates of appli-cability, see §§ 57.10 and 57.10T.

FOR FURTHER INFORMATIONCONTACT: Rachel S. Smith, (202) 317-6855 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

Section 9010 of the Patient Protectionand Affordable Care Act (PPACA), Pub-lic Law No. 111–148 (124 Stat. 119(2010)), as amended by section 10905 ofPPACA, and as further amended by sec-tion 1406 of the Health Care and Educa-tion Reconciliation Act of 2010, PublicLaw 111–152 (124 Stat. 1029 (2010))(collectively, the Affordable Care Act or

ACA) imposes an annual fee on coveredentities that provide health insurance forUnited States health risks. All referencesin this preamble to section 9010 are ref-erences to the ACA. Section 9010 did notamend the Internal Revenue Code (Code)but contains cross-references to specifiedCode sections. Unless otherwise indi-cated, all other references to subtitles,chapters, subchapters, and sections in thispreamble are references to subtitles, chap-ters, subchapters, and sections in the Codeand related regulations. All references to“fee” in this preamble are references tothe fee imposed by section 9010.

On November 27, 2013, the TreasuryDepartment and the IRS issued the HealthInsurance Providers Fee regulations as fi-nal regulations (TD 9643). On August 12,2014, the Treasury Department and theIRS issued Notice 2014–47, 2014–35IRB 522, to provide further guidance forthe 2014 fee year on the definition of acovered entity. The temporary regulationsprovide further guidance on the definitionof a covered entity for the 2015 fee yearand subsequent fee years.

General Overview

Section 9010(a) imposes an annual feeon each covered entity engaged in thebusiness of providing health insurance.The fee is due by the annual date specifiedby the Secretary, but in no event later thanSeptember 30th of each calendar year inwhich a fee must be paid (fee year).

Section 9010(b) requires the Secretaryto determine the annual fee for each cov-ered entity based on the ratio of the cov-ered entity’s net premiums written forhealth insurance for any United Stateshealth risk that are taken into account forthe calendar year immediately before thefee year (data year) to the aggregate netpremiums written for health insurance ofUnited States health risks of all coveredentities that are taken into account duringthe data year. In calculating the fee, theSecretary must determine each coveredentity’s net premiums written for UnitedStates health risks based on reports sub-mitted to the Secretary by the covered

entity and through the use of any othersource of information available to the Sec-retary.

Section 9010(c)(1) defines a coveredentity as any entity that provides healthinsurance for any United States health riskduring each fee year. Section 9010(c)(2)excludes the following entities from beingcovered entities: (A) Any employer to theextent that the employer self-insures itsemployees’ health risks; (B) any govern-mental entity; (C) any entity (i) that isincorporated as a nonprofit corporationunder a State law, (ii) no part of the netearnings of which inures to the benefit ofany private shareholder or individual, nosubstantial part of the activities of whichis carrying on propaganda, or otherwiseattempting, to influence legislation (ex-cept as otherwise provided in section501(h)), and which does not participate in,or intervene in, any political campaign onbehalf of (or in opposition to) any candi-date for public office, and (iii) more than80 percent of the gross revenues of whichis received from government programsthat target low income, elderly, or dis-abled populations under titles XVIII, XIX,and XXI of the Social Security Act; and(D) any entity that is described in section501(c)(9) (a voluntary employees’ benefi-ciary association (VEBA)) and is estab-lished by an entity (other than by an em-ployer or employers) for purposes ofproviding health care benefits.

Section 9010(c)(3)(A) provides a con-trolled group rule under which all personstreated as a single employer under section52(a) or (b) or section 414(m) or (o) aretreated as a single covered entity. Section9010(c)(4) provides that, if more than oneperson is liable to pay the fee on a singlecovered entity by reason of the applicationof the controlled group rule, then all suchpersons are jointly and severally liable forpayment of the fee.

Section 57.2(c)(1) of the Health Insur-ance Providers Fee regulations defines theterm controlled group to mean a group oftwo or more persons, including at leastone person that is a covered entity, that istreated as a single employer under section52(a), 52(b), 414(m), or 414(o). Section


57.2(c)(3)(ii) further provides that a per-son is treated as being a member of thecontrolled group if it is a member of thegroup at the end of the day on December31st of the data year.

Explanation of Provisions

Following the publication of the finalregulations in TD 9643, the Treasury De-partment and the IRS received questionsabout how to apply the exclusions undersection 9010(c)(2) to the general defini-tion of a covered entity. The TreasuryDepartment and the IRS also receivedquestions about whether covered entitiesmust report information on net premiumswritten for certain members of a con-trolled group. Notice 2014–47 was sub-sequently issued to resolve those ques-tions for the 2014 fee year. The temporaryregulations adopt the general approach ofNotice 2014–47 to resolve those ques-tions for the 2015 fee year and each sub-sequent fee year.

Application of Exclusions under Section9010(c)(2)

Notice 2014–47 provided that, for the2014 fee year, the Treasury Departmentand the IRS would not treat any entity asa covered entity if it would be excludedfrom the definition of a covered entitybecause it qualified for one of the exclu-sions under section 9010(c)(2) either forthe entire 2013 data year or for the entire2014 fee year, which began on January 1,2014. As described later in this preamble,the controlled group rules under section9010(c)(3)(A) and § 57.2(c)(1) do not ap-ply for the limited purpose of determiningwhether an entity qualifies for an exclu-sion under section 9010(c)(2). Notice2014–47 further provided that the entityshould not report its net premiums writtenfor the 2013 data year because the Trea-sury Department and the IRS would nottreat such an entity as a covered entity.

The temporary regulations amend therules in the existing Health Insurance Pro-viders Fee regulations to incorporate thegeneral approach in Notice 2014–47.Specifically, the temporary regulationsprovide that, for the 2015 fee year andeach subsequent fee year, an entity quali-fies for an exclusion under section9010(c)(2) if it qualifies for an exclusion

either for the entire data year ending onthe prior December 31st or for the entirefee year beginning on January 1st. Anentity that qualifies for an exclusion underthis rule is not a covered entity for that feeyear and must not report its net premiumswritten.

The temporary regulations also imposetwo additional requirements. First, thetemporary regulations generally impose aconsistency requirement that binds an en-tity to its original selection of either thedata year or the fee year (its test year) todetermine whether it qualifies for an ex-clusion under section 9010(c)(2) for the2015 fee year and each subsequent feeyear. For example, if an entity selects the2014 data year as its test year for the 2015fee year, it must use the data year as itstest year for the 2016 fee year and eachsubsequent fee year.

Second, the temporary regulations im-pose a special rule for an entity that usesthe fee year as its test year. A special ruleis important in this context because the feeis due by September 30th of the fee year,and it may not be clear until the end of thefee year whether an entity will in factqualify for an exclusion. If an entity usingthe fee year as its test year does not reportits net premiums written because it ex-pects to qualify for an exclusion undersection 9010(c)(2), but the entity ulti-mately does not qualify for an exclusion,the temporary regulations require the en-tity to use the data year as its test year inall subsequent fee years. In this circum-stance, the entity will necessarily be acovered entity that is required to report itsnet premiums written for the immediatelyfollowing fee year. In addition, an entitythat does not timely file a report in a feeyear, and that is a covered entity for thatfee year because it does not qualify for anexclusion, may be subject to penalties,including the failure to report penalty un-der section 9010(g)(2).

For example, assume that for the 2015fee year an entity used the fee year as itstest year and reasonably expected to qual-ify for the section 9010(c)(2)(C) exclusionfor that fee year. As a result, the entity didnot report its net premiums written and itwas not treated as a covered entity forpurposes of the 2015 fee calculation. Fur-ther assume that as of December 31, 2015,the entity did not satisfy the 80 percent

minimum gross revenues requirement ofsection 9010(c)(2)(C)(iii) and thereforedid not qualify for this or any other exclu-sion under section 9010(c)(2) for the 2015fee year. Under the temporary regulations,this entity must use the data year for eachsubsequent fee year to determine whetherit qualifies for an exclusion under section9010(c)(2). Thus, for the 2016 fee year,because this entity must determine its el-igibility for an exclusion based on the2015 data year, it would not be eligible foran exclusion under section 9010(c)(2) forthe 2016 fee year and must submit a reportin that year. This entity must also use thedata year as its test year for the 2017 feeyear and each subsequent fee year.

The Treasury Department and the IRSrequest comments regarding whetherthere are any circumstances in which anentity should be permitted by the IRS tochange its test year, and if so, what con-ditions and limitations should apply to anysuch change.

Reporting for Controlled GroupMembers

Notice 2014–47 provided that a con-trolled group must report net premiumswritten only for each person who is acontrolled group member at the end of theday on December 31st of the data year andwho would qualify as a covered entity inthe fee year if it were a single-personcovered entity (that is, not a member of acontrolled group). The temporary regula-tions incorporate this rule for the 2015 feeyear and each subsequent fee year. There-fore, a controlled group must not reportnet premiums written for any controlledgroup member who would fail to be acovered entity in the fee year if it were nota member of a controlled group. Althoughthat person’s net premiums written are nottaken into account, it remains a member ofthe controlled group and is jointly andseverally liable for the fee amount allo-cated to the controlled group.

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866, as supplemented by Executive Or-der 13563. Therefore, a regulatory assess-ment is not required. It has also been

Bulletin No. 2015–11 March 16, 2015749

determined that section 553(b) of the Ad-ministrative Procedure Act (5 U.S.C.chapter 5) does not apply to these regula-tions, and because these regulations do notimpose a collection of information onsmall entities, the Regulatory FlexibilityAct (5 U.S.C. chapter 6) does not apply.Pursuant to section 7805(f) of the Code,these temporary regulations have beensubmitted to the Chief Counsel for Advo-cacy of the Small Business Administra-tion for comment on its impact on smallbusinesses.

Drafting Information

The principal author of these regula-tions is Rachel S. Smith, IRS Office ofthe Associate Chief Counsel (Pass-throughs and Special Industries). How-ever, other personnel from the TreasuryDepartment and the IRS participated intheir development.

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 57 is amendedas follows:

PART 57—HEALTH INSURANCEPROVIDERS FEE

Paragraph 1. The authority citation forpart 57 continues to read in part as fol-lows:

Authority: 26 U.S.C. 7805; sec. 9010,Public Law 111–148 (124 Stat. 119(2010)).

* * * * *Par. 2. Section 57.2 is amended by:1. Redesignating paragraph (b)(3) as

paragraph (b)(4).2. Adding paragraph (b)(3).3. Revising paragraph (c)(3)(ii).The addition and revision read as fol-

lows:

§ 57.2 Explanation of terms.

* * * * *(b) * * *(3) [Reserved]. For further guidance,

see § 57.2T(b)(3).* * * * *(c) * * *(3) * * *

(ii) [Reserved]. For further guidancesee § 57.2T(c)(3)(ii).

* * * * *Par. 3. Section 57.2T is added to read

as follows:

§ 57.2T Explanation of terms(temporary).

(a) through (b)(2) [Reserved]. For furtherguidance, see § 57.2(a) through (b)(2).

(3) Application of exclusions—(i) Testyear. An entity qualifies for an exclusiondescribed in § 57.2(b)(2)(i) through (iv) ifit so qualifies in its test year. The term testyear means either the entire data year orthe entire fee year.

(ii) Consistency rule. For purposes ofparagraph (b)(3)(i) of this section, an en-tity must use the same test year as it usedin its first fee year beginning after Decem-ber 31, 2014, and in each subsequent feeyear. Thus, for example, if an entity usedthe 2014 data year as its test year for the2015 fee year, that entity must use the datayear as its test year for each subsequentfee year.

(iii) Special rule for fee year as testyear. For purposes of paragraph (b)(3) ofthis section, any entity that uses the feeyear as its test year but ultimately does notqualify for an exclusion described in§ 57.2(b)(2)(i) through (iv) for that entirefee year must use the data year as its testyear for each subsequent fee year.

(b)(4) through (c)(3)(i) [Reserved]. Forfurther guidance, see § 57.2(b)(4) through(c)(3)(i).

(ii) A person is treated as being a mem-ber of the controlled group if it is a mem-ber of the group at the end of the day onDecember 31st of the data year. However,a person’s net premiums written are in-cluded in net premiums written for thecontrolled group only if the person wouldqualify as a covered entity in the fee yearif the person were not a member of thecontrolled group.

(d) through (n) [Reserved]. For furtherguidance, see § 52.7(d) through (n).

Par. 4. Section 57.10 is revised to readas follows:

§ 57.10 Effective/applicability date.

(a) In general. Except as provided inparagraph (b), §§ 57.1 through 57.9 apply

to any fee that is due on or after Septem-ber 30, 2014.

(b) [Reserved]. For further guidance,see § 57.10T(b).

Par. 5. Section 57.10T is added to readas follows:

§ 57.10T Effective/applicability date(temporary).

(a) [Reserved]. For further guidance,see § 57.10(a).

(b) Paragraphs (b)(3) and (c)(3)(ii) of§ 57.2T. Paragraphs (b)(3) and (c)(3)(ii)of § 57.2T apply on February 26, 2015.

(c) Expiration date. Paragraphs (b)(3)and (c)(3)(ii) of § 57.2T expire on Febru-ary 23, 2018.

John Dalrymple,Deputy Commissioner for

Services and Enforcement.

Approved: February 19, 2015.

Mark J. Mazur,Assistant Secretary of the

Treasury (Tax Policy).

(Filed by the Office of the Federal Register on February 23,2015, 4:15 p.m., and published in the issue of the FederalRegister for February 26, 2015, 80 F.R. 10333)

26 CFR 1.41–9: Alternative simplified credit

T.D. 9712DEPARTMENT OF THETREASURYInternal Revenue Service26 CFR Part 1

Alternative Simplified CreditElection

AGENCY: Internal Revenue Service(IRS), Treasury.

ACTION: Final regulations and removalof temporary regulations.

SUMMARY: This document contains fi-nal regulations relating to the election ofthe alternative simplified credit under sec-tion 41(c)(5) of the Internal RevenueCode (Code). The final regulations affectcertain taxpayers claiming the credit un-der section 41.


DATES: Effective Date: These regula-tions are effective on February 27, 2015.

Applicability Date: For dates of appli-cability, see § 1.41–9(d).

FOR FURTHER INFORMATIONCONTACT: David Selig (202) 317-4137(not a toll-free number).


Background

This document amends 26 CFR part 1to provide rules relating to the time andmanner of electing the alternative simpli-fied credit (ASC) under section 41(c)(5)of the Internal Revenue Code (Code).

Section 41(a) provides an incrementaltax credit for increasing research activities(research credit) based on a percentage ofa taxpayer’s qualified research expensesabove a base amount. A taxpayer can ap-ply the rules and credit rate percentagesunder section 41(a)(1) to calculate thecredit (commonly referred to as the regu-lar credit) or a taxpayer can make an elec-tion to apply the ASC rules and credit ratepercentages under section 41(c)(5) to cal-culate the credit. Section 41(c)(5)(C) pro-vides that an ASC election under section41(c)(5) applies to the taxable year forwhich it is made and all succeeding tax-able years unless revoked with the consentof the Secretary.

On June 10, 2011, the Treasury De-partment and the IRS published final reg-ulations (TD 9528) (2011 Final Regula-tions) in the Federal Register (76 FR33994) relating to the election and calcu-lation of the ASC. Section 1.41–9(b)(2)provides that a taxpayer makes an electionunder section 41(c)(5) by completing theportion of Form 6765, “Credit for Increas-ing Research Activities,” (or successorform) relating to the ASC election, andattaching the completed form to the tax-payer’s timely filed (including extensions)original return for the taxable year towhich the election applies. Section 1.41–9(b)(2) also provides that a taxpayer maynot make an election under section41(c)(5) on an amended return and that anextension of time to make an election un-der section 41(c)(5) will not be grantedunder § 301.9100–3.

Following the publication of the 2011Final Regulations, the Treasury Depart-ment and the IRS received requests to

amend the regulations to allow taxpayersto make an ASC election on an amendedreturn. The requests explained that theburden of substantiating expenditures andcosts for the base period under the regularcredit can be costly, time-consuming, anddifficult, and suggested that taxpayers of-ten need additional time to determinewhether to claim the regular credit or theASC.

On June 3, 2014, the Treasury Depart-ment and the IRS published a notice ofproposed rulemaking by cross-referenceto temporary regulations (REG–133495–13) in the Federal Register (79 FR31892), and final and temporary regula-tions (TD 9666) (the Temporary Regula-tions) in the Federal Register (79 FR31863). The final regulations removed therule in § 1.41–9(b)(2) that prohibited ataxpayer from making an ASC electionfor a tax year on an amended return. In itsplace, the Temporary Regulations pro-vided a rule allowing a taxpayer to makean ASC election for a tax year on anamended return if the taxpayer had notpreviously claimed a section 41 credit forthat tax year on an original or amendedreturn. In addition, the Temporary Regu-lations provided that a taxpayer that is amember of a controlled group in a tax yearmay not make an election under section41(c)(5) for that tax year on an amendedreturn if any member of the controlledgroup for that year claimed the researchcredit using a method other than the ASCon an original or amended return.

Written and electronic comments re-sponding to the proposed regulations werereceived. No requests for a public hearingwere made and no public hearing washeld. After consideration of all the com-ments, the proposed regulations are ad-opted as revised by this Treasury decision.

Summary of Comments andExplanation of Provisions

Interaction with Section 280C Elections

A commenter requested clarificationregarding whether a section 280C(c)(3)election made for a taxable year on line 17of Form 6765, Credit For Increasing Re-search Activities, where no amount of reg-ular credit is claimed, will be viewed bythe IRS as a claim of the section 41(a)(1)credit and preclude an ASC election from

being made on an amended return for thattaxable year. Section 280(c)(3) allows ataxpayer to make an annual irrevocableelection to claim a reduced research creditrather than reducing the section 174 de-duction, as required by section 280(c)(1).A section 280C(c)(3) election must bemade on an original return. If a taxpayer isundecided whether to claim the regularcredit for a taxable year but wants to pre-serve the operative effect of the section280C(c)(3) election for that taxable year,then the taxpayer will make the section280C(c)(3) election on line 17 of Form6765, but leave the remaining section ofthe form blank. A section 280C(c)(3) elec-tion on line 17 of Form 6765 made in ataxable year does not, in and of itself,constitute a credit claim under section41(a)(1), and accordingly does not pre-clude a taxpayer from making an ASCelection on an amended return for thattaxable year.

Section 9100 Relief

One commenter requested that the finalregulations allow an extension of time tomake an election under section 41(c)(5)under § 301.9100–3. Under § 301.9100–3(c), the Commissioner will grant a rea-sonable extension of time to make a reg-ulatory election only when the interests ofthe Government will not be prejudiced bythe granting of relief. Under § 301.9100–3(c)(1)(ii), the interests of the Govern-ment are ordinarily prejudiced if the tax-able year in which the regulatory electionshould have been made or any taxableyears that would have been affected by theelection had it been timely made areclosed by the period of limitations on as-sessment under section 6501(a) before thetaxpayer’s receipt of a ruling granting re-lief under this section. Because the finalregulations allow a taxpayer to amend itsreturn to make the ASC election in a tax-able year that is not closed by the periodof limitations for assessment under sec-tion 6501(a) if no credit under section41(a)(1) was claimed in the prior taxableyear on an original or amended return, anextension of time under § 301.9100–3 tomake the ASC election is not necessaryduring this period. An extension of time tomake an ASC election in a taxable yearclosed by the period of limitations on as-


sessment under section 6501(a) ordinarilyprejudices the interests of the government.See section 301.9100–3(c)(1)(ii). Accord-ingly, the final regulations retain the rulethat an extension of time to make an elec-tion under section 41(c)(5) will not begranted under § 301.9100–3.

Period for Making an ASC Election

One commenter requested that the finalregulations provide that a taxpayer maymake an ASC election for an earlier,closed tax year on a later year’s return inwhich a research credit from that closedyear is reported on a carryforward sched-ule, or actually used as a credit againsttax, so long as no intervening amendedreturn claiming a research credit for thattax year using a different method has beenclaimed. The Temporary Regulations onlypermitted a taxpayer to elect the ASC onan amended return for taxable years end-ing before June 3, 2014, (the effective/applicability date of those regulations) ifthe taxpayer makes the election before theperiod of limitations for assessment of taxhas expired for that year. The rule in theTemporary Regulations provided a rea-sonable time period for taxpayers to de-termine whether or not to make an ASCelection with respect to a prior, open taxyear. To permit a taxpayer to make anASC election for a tax year in which theperiod of limitations for assessment of taxhas expired has the practical effect of per-mitting the taxpayer to make an ASC elec-tion on a return that cannot be amended.Therefore, these final regulations do notadopt this suggested modification.

One commenter requested that thesefinal regulations provide that an ASCelection can be made on an amended re-turn for a tax year so long as the period formaking a refund claim under section 6511has not expired for that tax year, even incases where the statute of limitations onassessment under section 6501 is closed.These final regulations retain the rule ofthe Temporary Regulations that a tax-payer must make an ASC election on anamended return before the statute of lim-itations on assessment under section6501(a) is closed. The general period un-der the statute of limitations on assess-ment under section 6501(a), which is threeyears after the tax return is filed, provides

a reasonable time for taxpayers to file anASC election on an amended return, and areasonable time for the IRS to examinethe amended return. This rule also pre-serves the integrity of the rule in thefinal regulations providing that an ex-tension of time to make an election un-der section 41(c)(5) will not be grantedunder § 301.9100–3. Under § 301.9100–3,the interests of the government are ordi-narily prejudiced if the taxable year inwhich a regulatory election should havebeen made or any taxable years that wouldhave been affected by the election had itbeen timely made are closed by the periodof limitations on assessment under section6501(a) before the taxpayer’s receipt of aruling granting relief under § 301.9100.This requirement is mitigated by the factthat the period of limitations on assess-ment may be extended by agreement ofthe IRS and the taxpayer. For clarity, thelanguage found in the effective date of theTemporary Regulations referencing theperiod of limitations for assessment of taxis added to the text of the final regulationsunder § 1.41–9(b)(2) relating to the timeand manner of making the ASC election.

Controlled Group ASC Elections

One commenter requested that the finalregulations modify the rules for controlledgroup ASC elections under § 1.41–9(b)(4), under which only the designatedmember of a controlled group may makeor revoke an ASC election. Revising thoserules is beyond the scope of these regula-tions. Therefore, the final regulations donot amend § 1.41–9(b)(4).

Modification of the Election Rule

One commenter requested that thesefinal regulations amend the rule in theTemporary Regulations that allows a tax-payer to make an ASC election for a taxyear on an amended return only if thetaxpayer has not previously claimed thesection 41 credit on its original return oran amended return for that tax year toclarify that the previously claimed section41 credit is determined under section41(a)(1), and not under sections 41(a)(2)or (3). The commenter stated that the ASCis an alternative method to the regularcredit under section 41(a)(1), and whether

a taxpayer elects the ASC or claims theregular credit does not impact the deter-mination of the credits allowable undersections 41(a)(2) and 41(a)(3). This ap-proach is consistent with the language ofsection 41(c)(5)(A) and § 1.41–9(a),which specifically reference section41(a)(1). Accordingly, the final regula-tions provide that a taxpayer may make anASC election for a tax year on anamended return only if the taxpayer hasnot previously claimed the section41(a)(1) credit on its original return or anamended return for that tax year.

Effect on Other Documents

The Temporary Regulations are obso-lete for taxable years beginning on or afterFebruary 27, 2015.

Special Analyses

It has been determined that this Trea-sury decision is not a significant regula-tory action as defined in Executive Order12866, as supplemented by Executive Or-der 13563. Therefore, a regulatory assess-ment is not required. It also has beendetermined that section 553(b) of the Ad-ministrative Procedure Act (5 U.S.C.chapter 5) does not apply to these regula-tions. It is hereby certified that the collec-tion of information in these regulationswill not have a significant economic im-pact on a substantial number of small en-tities. Although a substantial number ofsmall entities may make an ASC electionon an amended return pursuant to theseregulations, the economic impact of anycollection burden on these entities relatingto this election is minimal because theregulations will result in a benefit to tax-payers by providing additional time fortaxpayer to calculate and elect the ASC.Accordingly, a regulatory flexibility anal-ysis under the Regulatory Flexibility Act(5 U.S.C. chapter 6) is not required. Pur-suant to section 7805(f) of the Code, theseregulations have been submitted to theChief Counsel for Advocacy of the SmallBusiness Administration for comment ontheir impact on small business.


The principal author of these regula-tions is David Selig, Office of the Asso-


ciate Chief Counsel (Passthroughs andSpecial Industries). However, other per-sonnel from the IRS and the TreasuryDepartment participated in their develop-ment.

* * * * *

Adoption of Amendments to theRegulations

Accordingly, 26 CFR part 1 is amendedas follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation forpart 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Section 1.41–9 also issued under 26

U.S.C. 41(c)(5)(C). * * *Par. 2. Section 1.41–9 is amended by:1. Revising paragraph (b)(2).2. Adding a third and fourth sentence

to paragraph (d).The revision and addition read as fol-

lows:

§ 1.41–9 Alternative simplified credit.

* * * * *(b) * * *

(2) Time and manner of election. Ataxpayer makes an election under section41(c)(5) by completing the portion ofForm 6765, “Credit for Increasing Re-search Activities,” (or successor form) re-lating to the election of the ASC, andattaching the completed form to the tax-payer’s timely filed (including extensions)original return for the taxable year towhich the election applies. A taxpayermay make an election under section41(c)(5) for a tax year on an amendedreturn, but only if the taxpayer has notpreviously claimed a section 41(a)(1)credit on its original return or an amendedreturn for that tax year, and only if that taxyear is not closed by the period of limita-tions on assessment under section6501(a). An extension of time to make anelection under section 41(c)(5) will not begranted under § 301.9100–3 of this chap-ter. A taxpayer that is a member of acontrolled group in a tax year may notmake an election under section 41(c)(5)for that tax year on an amended return ifany member of the controlled group forthat tax year previously claimed the re-search credit under section 41(a)(1) usinga method other than the ASC on an orig-inal or amended return for that tax year.See paragraph (b)(4) of this section for

additional rules concerning controlledgroups. See also § 1.41–6(b)(1) requiringthat all members of the controlled groupuse the same method of computation.

* * * * *(d) Effective/applicability date. * * *

Paragraph (b)(2) of this section applies toelections with respect to taxable yearsending on or after February 27, 2015. Fortaxable years ending before February 27,2015, see § 1.41–9T as contained in 26CFR part 1, revised April 1, 2015.

§ 1.41–9T [Removed]

Par. 3. Section 1.41–9T is removed.



Approved: February 3, 2015.

Mark J. Mazur,Assistant Secretary of the

Treasury (Tax Policy).

(Filed by the Office of the Federal Register on February 26,2015, 8:45 a.m., and published in the issue of the FederalRegister for February 27, 2015, 80 F.R. 10587)


Part III. Administrative, Procedural, and MiscellaneousPer Capita Payments fromProceeds of Settlements ofIndian Tribal Trust CasesNotice 2015–20

BACKGROUND

Notice 2013–1, 2013–3 IRB 281, pro-vides guidance on the federal tax treat-ment of per capita payments that membersof Indian tribes receive from proceeds ofcertain settlements of tribal trust cases be-tween the United States and those Indiantribes. Additional tribes have settled tribaltrust cases against the United States sincepublication of Notice 2013–1. This noticeprovides an updated Appendix that re-flects the additional settlement agree-ments.

EFFECT ON OTHER DOCUMENTS

Notice 2013–1 Appendix is modifiedand superseded.

FURTHER INFORMATION

For further information regarding thisnotice, please contact Telly Meier atphone number (202) 317-8494(not a toll-free number).

Appendix

Tribes That Have Entered intoSettlement Agreements of Tribal

Trust Cases

1. Assiniboine and Sioux Tribes of theFort Peck Reservation

2. Bad River Band of Lake SuperiorChippewa Indians

3. Blackfeet Tribe of the Blackfeet In-dian Reservation

4. Bois Forte Band of Chippewa5. Cachil Dehe Band of Wintun Indians

of the Colusa Rancheria6. Chippewa Cree Tribe of the Rocky

Boy’s Reservation7. Coeur d’Alene Tribe8. Confederated Salish and Kootenai

Tribes9. Confederated Tribes of Siletz Indi-

ans10. Confederated Tribes of the Colville

Reservation

11. Confederated Tribes of the GoshuteReservation

12. Crow Creek Sioux Tribe13. Eastern Shawnee Tribe of Okla-

homa14. Hualapai Indian Tribe15. Iowa Tribe of Kansas and Nebraska16. Kaibab Band of Paiute Indians of

Arizona17. Kickapoo Tribe of Kansas18. Lac Courte Oreilles Band of Lake

Superior Chippewa Indians19. Lac du Flambeau Band of Lake

Superior Chippewa Indians20. Leech Lake Band of Ojibwe21. Lower Brule Sioux Tribe22. Makah Indian Tribe of the Makah

Reservation23. Mescalero Apache Tribe24. Minnesota Chippewa Tribe25. Nez Perce Tribe26. Nooksack Indian Tribe27. Northern Cheyenne Tribe of Indi-

ans28. Omaha Tribe of Nebraska29. Passamaquoddy Tribe of Maine30. Pawnee Nation31. Prairie Band of Potawatomi Nation32. Pueblo of Zia33. Quechan Tribe of the Fort Yuma

Reservation34. Red Cliff Band of Lake Superior

Chippewa Indians35. Rincon Luiseño Band of Indians36. Rosebud Sioux Tribe37. Round Valley Indian Tribes38. Salt River Pima-Maricopa Indian

Community39. Santee Sioux Tribe of Nebraska40. Sault Ste. Marie Tribe41. Shoshone-Bannock Tribes of the

Fort Hall Reservation42. Soboba Band of Luiseno Indians43. Spirit Lake Dakotah Nation44. Spokane Tribe of Indians45. Standing Rock Sioux Tribe46. Stillaguamish Tribe of Indians47. Summit Lake Paiute Tribe48. Swinomish Indian Tribal Commu-

nity49. Te-Moak Tribe of Western Sho-

shone Indians50. Tohono O’odham Nation51. Tulalip Tribes52. Tule River Indian Tribe

53. Ute Indian Tribe of the Uintah andOuray Reservation

54. Ute Mountain Ute Tribe55. Winnebago Tribe of Nebraska56. Qawalangin Tribe of Unalaska57. Tlingit & Haida Tribes of Alaska58. Northwestern Band of Shoshone

Indians59. Hoopa Valley Tribe60. Ak-Chin Indian Community61. Oglala Sioux Tribe62. Yoruk Tribe63. Cheyenne River Sioux Tribe64. Paiute-Shoshone Indians of the

Bishop Community of the Bishop Colony65. Seminole Nation of Oklahoma66. Otoe-Missouria Tribe of Oklahoma67. Samish Indian Nation68. Tonkawa Tribe of Indians of Okla-

homa69. Yakama Nation70. Miami Tribe of Oklahoma71. Shoshone Indian Tribe and the

Northern Arapahoe Indian Tribe of theWind River Reservation

72. Pueblo of Laguna73. Navajo Nation74. Caddo Nation of Oklahoma75. Gros Ventre and Assiniboine

Tribes of the Fort Belknap Indian Reser-vation

User Fees and Change of Address for Submission ofApplications for Approval of § 403(b) Pre-approvedPlans

Revenue Procedure 2015–22

SECTION 1. PURPOSE

This revenue procedure contains amodification to Revenue Procedure 2013–22, 2013–18 I.R.B. 985, as modified byRevenue Procedure 2014–28, 2014–16I.R.B. 944, and modifications to RevenueProcedure 2015–8, 2015–1 I.R.B. 235. Inparticular, this revenue procedure changesthe addresses to which applications foropinion and advisory letters for § 403(b)pre-approved plans should be submittedand inserts a user fee that was omittedfrom Rev. Proc. 2015–8.


SECTION 2. BACKGROUND

.01 Rev. Proc. 2013–22 established anew program for the submission of § 403(b)pre-approved plans to the Internal RevenueService (Service), modeled after the pro-gram for pre-approved § 401(a) qualifiedplans, which is described in Rev. Proc.2011–49, 2011–44 I.R.B. 608.

.02 Rev. Proc. 2014–28 modified,among other changes, section 11.03 of Rev.Proc. 2013–22 to allow a person to sponsora plan as a minor modifier of a § 403(b)volume submitter specimen plan of a masssubmitter under the same conditions listedin section 11.03 for a person sponsoring aplan as a minor modifier of a § 403(b)prototype plan of a mass submitter.

.03 The modifications to Rev. Proc.2013–22 contained in Rev. Proc. 2014–28did not specify a user fee for a minormodifier of a § 403(b) volume submitterspecimen plan of a mass submitter.

.04 Rev. Proc. 2015–8, which, in part,provides a fee schedule for certain filingsand submissions to the Service, did notinclude a user fee for a minor modifier ofa § 403(b) volume submitter specimenplan of a mass submitter.

SECTION 3. MODIFICATION OFREV. PROC. 2013–22

The following change is made to Rev.Proc. 2013–22:

.01 The last sentence of section 17.03of Rev. Proc. 2013–22 is revised to readas follows:

The request is to be sent to:

Internal Revenue ServiceAttn: Pre-Approved Plans CoordinatorRoom 5106, Group 7521P.O. Box 2508Cincinnati, OH 45201-2508

SECTION 4. MODIFICATION OFREV. PROC. 2015–8

The following changes are made toRev. Proc. 2015–8

.01 Section 6.07 is modified to include auser fee for an advisory letter for a § 403(b)volume submitter specimen plan that is aminor modifier of a § 403(b) volume sub-mitter specimen plan of a mass submitter.Section 6.07 is revised to add a new section (4)and the remaining sections are renumbered.As revised, section 6.07 reads as follows:

.07 Advisory Letters on § 403(b)volume submitter plans.

(1) Section 403(b) volumesubmitter specimen plan(non-mass submitter)

(a) with no or oneadoption agreement

$12,000

(b) per additional adop-tion agreement

$ 9,500

(2) Section 403(b) volumesubmitter mass submitterspecimen plan

(a) with no or oneadoption agreement

$12,000

(b) per additional adop-tion agreement

$ 1,000

(3) Section 403(b) volumesubmitter specimen plan ofa word-for-word Identicaladopter of a mass submitterspecimen plan

$ 300

(4) Section 403(b) vol-ume submitter specimenplan of a minor modifierof a § 403(b) volumesubmitter mass submitterspecimen plan (or peradoption agreement, ifapplicable)

$ 1,000

(5) Assumption of spon-sorship of an approved§ 403(b) volume submit-ter plan, without anyamendment to the plandocument, by a new en-tity, as evidenced by achange of employer iden-tification number, perspecimen plan

$ 300

(6) Change in nameand/or address of practi-tioner of an approved§ 403(b) volume submit-ter specimen plan, perspecimen plan

None

.02 Section 7.01(3) is deleted.

.03 Section 7.02 is restated to include thesubmission of applications for opinion andadvisory letters for § 403(b) pre-approvedplans and to provide the correct addressesfor all pre-approved plan submissions. Asrevised, section 7.02 reads as follows:

.02 Matters handled by EP or EO De-terminations Office.

(1) The following types of requests andapplications are handled by the EP or EO

Determinations Office and should be sent tothe Internal Revenue Service Center in Co-vington, Kentucky, at the address shownbelow: (a) requests for determination letterson the qualified status of employee plansunder § 401, 403(a), or 409, and the exemptstatus of any related trust under § 501; (b)applications for recognition of tax exemp-tion on Form 1023, Form 1024 and Form1028; (c) requests for determination letterssubmitted with Form 8940; (d) requests forchanges in accounting period; and (e) andother applications for recognition of qualifi-cation or exemption (other than on Form1023–EZ). The address is:

Internal Revenue ServiceAttention: EP/EO Determination

LettersStop 31P.O. Box 12192Covington, KY 41012-0192

(2) Applications for recognition of ex-emption on Form 1023–EZ are handled bythe EO Determinations Office, but mustbe submitted electronically online atwww.pay.gov. Paper submissions of Form1023–EZ will not accepted.

(3) The following types of requests andapplications are handled by the EP Deter-minations Office and should be sent to theInternal Revenue Service at the addressshown below: (a) requests for master andprototype opinion letters and for volumesubmitter advisory letters on the form ofpre-approved employee plans under § 401or 403(a); (b) the exempt status of anyrelated trust under § 501; and (c) requestsfor prototype opinion letters and for vol-ume submitter advisory letters for§ 403(b) pre-approved plans under Rev.Proc. 2013–22. The address is:

Internal Revenue ServiceAttn: Pre-Approved Plans CoordinatorP.O. Box 2508Rm. 5106: Group 7521Cincinnati, OH 45201

(4) Determinations and requests notsubject to a user fee are handled by the EODeterminations Office and should be sentto the Internal Revenue Service at theaddress shown below:

Internal Revenue ServiceP.O. Box 2508Rm. 4024Cincinnati, OH 45201


(5) Applications shipped by ExpressMail or a delivery service for all of theabove except for pre-approved em-ployee plans should be sent to:

Internal Revenue ServiceAttention: EP/EO Determination

LettersStop 31201 West Rivercenter BoulevardCovington, KY 41011

Applications shipped by Express Mailor a delivery service for pre-approvedemployee plans should be sent to:

Internal Revenue ServiceAttn: Pre-Approved Plans Coordinator550 Main StreetRoom 5106: Group 7521Cincinnati, OH 45202

SECTION 5. PAPERWORKREDUCTION ACT

The collections of information containedin the revenue procedure have been re-viewed and approved by the Office of Man-agement and Budget in accordance with thePaperwork Reduction Act (44 U.S.C. 3507)under control number 1545-1520.

SECTION 6. EFFECT ON OTHERDOCUMENTS

Rev. Proc. 2013–22 and Rev. Proc.2015–8 are modified.

SECTION 7. EFFECTIVE DATE

The modifications in this revenue proce-dure are effective as of February 26, 2015.

SECTION 8. DRAFTINGINFORMATION

The principal author of this revenueprocedure is Kathleen Herrmann of theOffice of Associate Chief Counsel (TaxExempt and Government Entities). Forfurther information regarding this notice,contact Ms. Herrmann at (202) 317-6799(not a toll-free number).


Part IV. Items of General InterestHealth Insurance ProvidersFee

REG–143416–14


ACTION: Notice of proposed rulemakingby cross-reference to temporary regulations.

SUMMARY: This document containsproposed regulations that provide rules forthe definition of a covered entity for pur-poses of the fee imposed by section 9010of the Patient Protection and AffordableCare Act, as amended. In the Rules andRegulations section of this issue of theFederal Register, the IRS is issuing tem-porary regulations. The text of thosetemporary regulations also serves as thetext of these proposed regulations. Theproposed regulations are necessary toclarify certain terms in section 9010.The proposed regulations affect personsengaged in the business of providinghealth insurance for United States healthrisks.

DATES: Comments and requests for apublic hearing must be received by May27, 2015.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–143416–14), room5203, Internal Revenue Service, PO Box7604, Ben Franklin Station, Washington,DC 20044. Submissions may be hand-delivered Monday through Friday be-tween the hours of 8 a.m. and 4 p.m. toCC:PA:LPD:PR (REG–143416–14), Cou-rier’s Desk, Internal Revenue Service, 1111Constitution Avenue, NW, Washington,DC, or sent electronically, via the FederaleRulemaking portal at www.regulations.gov(IRS REG–143416–14)

FOR FURTHER INFORMATIONCONTACT: Concerning the proposedregulations, Rachel S. Smith, (202) 317-6855; concerning submissions of com-ments and request for a hearing, ReginaJohnson, (202) 317-6901 (not toll-freenumbers).


Background

Temporary regulations in the Rulesand Regulations section of this issue ofthe Federal Register amend the HealthInsurance Providers Fee Regulations (26CFR Part 57) and serve as the text forthese proposed regulations.

Special Analyses

It has been determined that these pro-posed regulations are not a significant reg-ulatory action as defined in Executive Or-der 12866, as supplemented by ExecutiveOrder 13563. Therefore, a regulatory as-sessment is not required. It also has beendetermined that section 553(b) of the Ad-ministrative Procedure Act (5 U.S.C.chapter 5) does not apply to these regula-tions, and because the regulation does notimpose a collection of information onsmall entities, the Regulatory FlexibilityAct (5 U.S.C. chapter 6) does not apply.Pursuant to section 7805(f) of the Code,these regulations have been submitted tothe Chief Counsel for Advocacy of theSmall Business Administration for com-ment on its impact on small business.

Comments and Requests for a PublicHearing

Before the proposed regulations are ad-opted as final regulations, considerationwill be given to any comments that aresubmitted timely to the IRS as prescribedin this preamble under the “Addresses”heading. The Treasury Department andthe IRS request comments on all aspectsof the proposed regulations. All commentswill be available at www.regulations.govor upon request. A public hearing will bescheduled if requested in writing by anyperson that timely submits written com-ments. If a public hearing is scheduled,notice of the date, time, and place for thepublic hearing will be published in theFederal Register.


The principal author of these proposedregulations is Rachel S. Smith, IRS Officeof the Associate Chief Counsel (Pass-

throughs and Special Industries). How-ever, other personnel from the TreasuryDepartment and the IRS participated intheir development.

* * * * *

Proposed Amendments to theRegulations

Accordingly, 26 CFR part 57 is pro-posed to be amended as follows:

PART 57—HEALTH INSURANCEPROVIDERS FEE

Paragraph 1. The authority citation forpart 57 continues to read in part as follows:

Authority: 26 U.S.C. 7805; sec. 9010,Public Law 111–148 (124 Stat. 119 (2010)).

* * * * *Par. 2. Section 57.2 is amended by

revising paragraphs (b)(3) and (c)(3)(ii) toread as follows:

§ 57.2 Explanation of terms.

* * * * *(b) * * *(3) [The text of proposed § 57.2(b)(3)

is the same as the text of § 57.2T(b)(3)published elsewhere in this issue of theFederal Register].

* * * * *(c) * * *(3) * * *(ii) [The text of proposed § 57.2(c)(3)(ii)

is the same as the text of § 57.2T(c)(3)(ii)published elsewhere in this issue of the Fed-eral Register].

* * * * *Par. 3. Section 57.10 is amended by

revising paragraph (b) to read as follows:

§ 57.10 Effective/applicability date.

* * * *(b) [The text of proposed § 57.10(b) is

the same as the text of § 57.10T(b) pub-lished elsewhere in this issue of the Fed-eral Register].




(Filed by the Office of the Federal Register on [date], [time],and published in the issue of the Federal Register for [date],[number] F.R. [number]

[FR Doc. 2015–03945 Filed 02/23/2015 at 4:15 pm; Publication Date: 02/26/2015]

Changes to EmployeePlans Determination LetterProcessing

Announcement 2015–1

This announcement describes changesto the processing of employee plans de-termination letters that will take effect in2015. These changes are being adopted asa result of a process improvement strategydesigned to promote case processing effi-ciency.

The changes to the determination letterprocedures described in this announce-ment will be reflected in Rev. Proc.2015–6, which will be published in IRB2015–1 and be effective on February 1,2015. Rev. Proc. 2015–6 will set forth theService’s procedures for issuing determi-nation letters on the qualified status ofemployee plans.

Incomplete Applications – ProceduralRequirements. Upon receipt of a timelyfiled determination letter application(“Application”), the Service will reviewthe Application to determine if it is com-plete. For an Application to be complete,it must include all of the information anddocuments required by Rev. Proc.2015–6, including, but not limited to, acompleted copy of the Procedural Re-quirements Checklist set forth in Forms5300, 5307, 5310 and 5316. The Proce-dural Requirements Checklist is designedto assist applicants in the filing of a com-plete Application. If an Application is in-complete, the Service will contact the ap-plicant in writing and request the missinginformation. The applicant will have 30days from the date of the letter to providethe information to the Service. If the ap-plicant fails to provide the informationwithin the 30-day period, the case will beclosed. The Service will retain the incom-plete Application, and the user fee submit-ted with the Application will not be re-funded. The applicant may submit a newon-cycle Application, with a new user fee,by the end of the plan’s remedial amend-

ment cycle, unless a later date is specifiedin the Service’s letter informing the appli-cant that the case has been closed. How-ever, if both the response deadline and thepostmark date of any response to the letteridentifying the missing information occurafter the end of the plan’s remedialamendment cycle, the remedial amend-ment cycle will not be extended and theService will send the applicant a final dis-position letter.

The Service intends to develop a refer-ence list (“Reference List”) that applicantsmay use to indicate the specific provisionsin the plan document that reflect theitems in the Cycle E Cumulative List. Atemplate of the Reference List will beavailable at www.irs.gov. The inclusionof a completed Reference List with theApplication will facilitate the Service’sreview of the Application, and is en-couraged. Submission of a ReferenceList is not mandatory in Cycle E; how-ever, the Service is considering makingthe inclusion of the Reference List man-datory beginning the following year, inCycle A.

Request for Additional Information –Technical Review. The Service will notconduct technical review of an Applica-tion until it is procedurally complete, asdescribed above. During the course of thetechnical review, the Service may issue awritten request for additional informationfrom the applicant. The written requestwill specify the time period in which theapplicant must supply the required infor-mation. If the applicant’s response to thisrequest is not timely and complete, theService will inform the applicant again, inwriting, that the applicant must providethe specified information within a speci-fied period of time. If the applicant’s re-sponse to the second request is not timelyand complete, the case will be closed, thedocuments retained, and the user fee sub-mitted with the Application will not berefunded. The applicant may submit a newon-cycle Application, with a new user fee,by the end of the plan’s remedial amend-ment cycle, unless a later date is specifiedin the Service’s letter informing the appli-cant that the case has been closed. How-ever, if both the response deadline and thepostmark date of any response to the sec-ond request occur after the end of theplan’s remedial amendment cycle, the re-

medial amendment cycle will not be ex-tended and the Service will send the ap-plicant a final disposition letter.

DRAFTING INFORMATION

The principal author of this announce-ment is Sherri Edelman of the EmployeePlans, Tax Exempt and Government En-tities Division. Questions regarding thisannouncement may be sent via e-mail [email protected].

Deletions From CumulativeList of Organizations,Contributions to Which areDeductible Under Section170 of the Code

Announcement 2015–10

The Internal Revenue Service has re-voked its determination that the organiza-tions listed below qualify as organiza-tions described in sections 501(c)(3) and170(c)(2) of the Internal Revenue Codeof 1986.

Generally, the IRS will not disallowdeductions for contributions made to alisted organization on or before the date ofannouncement in the Internal RevenueBulletin that an organization no longerqualifies. However, the IRS is not pre-cluded from disallowing a deduction forany contributions made after an organiza-tion ceases to qualify under section170(c)(2) if the organization has nottimely filed a suit for declaratory judg-ment under section 7428 and if the con-tributor (1) had knowledge of the revoca-tion of the ruling or determination letter,(2) was aware that such revocation wasimminent, or (3) was in part responsiblefor or was aware of the activities or omis-sions of the organization that broughtabout this revocation.

If on the other hand a suit for declara-tory judgment has been timely filed, con-tributions from individuals and organiza-tions described in section 170(c)(2) thatare otherwise allowable will continue tobe deductible. Protection under section7428(c) would begin on March 16, 2015and would end on the date the court firstdetermines the organization is not de-scribed in section 170(c)(2) as more par-


ticularly set for in section 7428(c)(1).For individual contributors, the maxi-mum deduction protected is $1,000,

with a husband and wife treated as onecontributor. This benefit is not extendedto any individual, in whole or in part, for

the acts or omissions of the organizationthat were the basis for revocation.

NAME OF ORGANIZATION Effective Date of Revocation LOCATION

Academy of America July 1, 2001 Oak Park, MI

National LUST Program Fund March 29, 2011 Richmond, VA

Association for Honest Attorneys (AHA) January 1, 2010 Derby, KS

Hispanic Office of Planning & Evaluation Inc. July 1, 2011 Foxboro, MA

Determination of AdjustedApplicable Federal Ratesunder Section 1288 andthe Adjusted FederalLong-Term Rate underSection 382

REG–136018–13


ACTION: Notice of proposed rulemakingand notice of public hearing.

SUMMARY: This document containsproposed regulations that provide themethod to be used to adjust the applicableFederal rates (AFRs) under section 1288of the Internal Revenue Code (Code) (ad-justed AFRs) for tax-exempt obligationsand the method to be used to determinethe long-term tax-exempt rate and the ad-justed Federal long-term rate under sec-tion 382. For tax-exempt obligations, theproposed regulations affect the determina-tion of original issue discount under sec-tion 1273 and of total unstated interestunder section 483. In addition, the pro-posed regulations affect the determinationof the limitations under sections 382 and383 on the use of certain operating losscarryforwards, tax credits, and other attri-butes of corporations following ownershipchanges. This document also contains arequest for comments and provides noticeof a public hearing on these proposedregulations.

DATES: Written or electronic commentsmust be received by June 1, 2015. Out-lines of topics to be discussed at the publichearing scheduled for June 24, 2015 mustbe received by June 1, 2015.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG–136018–13), Room5203, Internal Revenue Service, P.O. Box7604, Ben Franklin Station, Washington,DC 20044. Submissions may be hand-delivered Monday through Friday betweenthe hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG–136018–13), Courier’sDesk, Internal Revenue Service, 1111Constitution Avenue, N.W., Washing-ton, DC, or sent electronically, via theFederal eRulemaking portal at www.regulations.gov (IRS REG–136018 –13). The public hearing will be held inthe IRS Auditorium, Internal RevenueBuilding, 1111 Constitution Avenue,N.W., Washington, DC.

FOR FURTHER INFORMATIONCONTACT: Concerning the proposedregulations under section 1288, Jason G.Kurth at (202) 317-6842; concerning theproposed regulations under section 382,William W. Burhop at (202) 317-6847;concerning submissions of comments, thehearing, and/or to be placed on the build-ing access list to attend the hearing, Olu-wafunmilayo (Funmi) Taylor at (202)317-6901 (not toll-free numbers).


Background

This document contains proposedamendments to 26 CFR part 1 (IncomeTax Regulations) under sections 382 and1288 of the Code. The proposed regula-tions provide the new method by whichthe Treasury Department and the IRS pro-pose to determine the adjusted AFRs un-der section 1288 to take into account thetax exemption for interest on tax-exemptobligations (as defined in section1275(a)(3) and § 1.1275–1(e)) and thelong-term tax-exempt rate and the ad-

justed Federal long-term rate under sec-tion 382(f) to take into account differ-ences between rates on long-term taxableand tax-exempt obligations.

Section 1274(d) directs the Secretaryto determine the AFRs that are used fordetermining the imputed principal amountof debt instruments to which section 1274applies, computing total unstated intereston payments to which section 483 applies,and other purposes. Under section1274(d)(1), the AFR is: (i) in the case of adebt instrument with a term not over threeyears, the Federal short-term rate; (ii) inthe case of a debt instrument with a termover three years but not over nine years,the Federal mid-term rate; and (iii) in thecase of a debt instrument with a term overnine years, the Federal long-term rate.Sections 1274(d)(2) and (3) provide spe-cial rules for selecting the appropriateAFR in specified circumstances. Section1274(d)(2) provides that, in the case of asale or exchange, the AFR shall be thelowest AFR in effect for any month in the3-calendar-month period ending with thefirst calendar month in which there is abinding contract in writing for the sale orexchange. Section 1274(d)(3) requiresthat options to renew or extend be takeninto account in determining the term of adebt instrument. During each month, theTreasury Department determines theAFRs that will apply during the followingcalendar month based on the average mar-ket yield of outstanding marketable obli-gations of the United States with appro-priate maturities. See § 1.1274–4(b). TheIRS publishes the AFRs for each month inthe Internal Revenue Bulletin (see§ 601.601(d)(2)(ii)).

Section 1288(b)(1) provides that, in ap-plying section 483 or section 1274 to atax-exempt obligation, under regulations


prescribed by the Secretary, appropriateadjustments shall be made to the AFR totake into account the tax exemption forinterest on the obligation. The IRS pub-lishes the adjusted AFRs for each monthin the Internal Revenue Bulletin (see§ 601.601(d)(2)(ii)).

In the case of a corporation that hasundergone an ownership change describedin section 382(g): (i) section 382 places anannual limit (the section 382 limitation)on the amount of the corporation’s taxableincome that may be offset by certain netoperating loss carryforwards and built-inlosses; and (ii) section 383 places a limit,determined by reference to the section 382limitation, on the amount of the corpora-tion’s income tax liability that may beoffset by certain tax credits and other taxattributes. Under section 382(b)(1), thesection 382 limitation generally equalsthe product of (A) the value of the stock ofthe corporation immediately prior to theownership change and (B) the long-termtax-exempt rate.

Section 382(f)(1) defines the long-termtax-exempt rate as the highest of the ad-justed Federal long-term rates in effect forany month in the three-calendar-monthperiod ending with the calendar month inwhich the ownership change occurs. Sec-tion 382(f)(2) provides that the term “ad-justed Federal long-term rate” means theFederal long-term rate determined undersection 1274(d), except that sections1274(d)(2) and (3) shall not apply, andsuch rate shall be properly adjusted fordifferences between rates on long-termtaxable and tax-exempt obligations.

Section 382(f) was added to the Codeby the Tax Reform Act of 1986, PublicLaw 99–514 (100 Stat. 2254). The Reportof the Committee on Ways and Means onH.R. 3838, the Tax Reform Act of 1985(the title of the Act as it passed theHouse), states that the long-term tax-exempt rate should be determined by ad-justing the Federal long-term rate (deter-mined under section 1274) pursuant tosection 1288 to take into account tax ex-emption. H.R. Rep. No. 99–426, 99thCong., 1st Sess. 268 (1985) (1986–3 CB(Vol. 2) 1, 268). The Conference Reportfor the Tax Reform Act of 1986 states thatthe adjusted Federal long-term rate is tobe computed as the yield on a diversifiedpool of prime, general obligation tax-

exempt bonds with remaining periods tomaturity of more than nine years. Thereport also explains that it is necessary tothe purposes of section 382 that the long-term tax-exempt rate be lower than theFederal long-term rate. Further, the Com-mittee anticipated that the long-term tax-exempt rate would ordinarily fall in arange between (i) the Federal long-termrate multiplied by a percentage equal tothe difference between 100 percent andthe corporate tax rate, and (ii) 100 percentof the Federal long-term rate. 2 H.R. Rep.No. 99–841 (Conf. Rep.), 99th Cong., 2dSess. II–188 (1986) (1986–3 CB (Vol. 4)1, 188). Under current tax rates, thatwould be between 65 percent and 100percent of the Federal long-term rate.

Since November 1986, the adjustedFederal long-term rate published undersection 382(f)(2) has been equal to thelong-term adjusted AFR with annual com-pounding published under section 1288(b)in the same month. See Rev. Rul. 86–133(1986–2 CB 59) (see § 601.601(d)(2)(ii)).For calendar months from November1986 to February 2013, the Treasury De-partment determined the adjusted Federallong-term rate and each adjusted AFR de-scribed in section 1288(b)(1) by multiply-ing the corresponding AFR by a fraction(the adjustment factor). The numerator ofthe adjustment factor was a compositeyield of the highest-grade tax-exempt ob-ligations available, which are prime, gen-eral obligation tax-exempt obligations.The denominator was a composite yield ofU.S. Treasury obligations with maturitiessimilar to those of the tax-exempt obliga-tions. Each of the composite yields wasmeasured over a one-month period.

Since the beginning of 2008, marketyields of prime, general obligation tax-exempt obligations have sometimes ex-ceeded market yields of comparable U.S.Treasury obligations, causing the adjustedFederal long-term rate and each adjustedAFR to exceed the corresponding AFRs.This relationship between the adjustedrates and the corresponding AFRs showedthat the adjustment factor no longerserved the purposes of sections 1288(b)(1)and 382(f)(2), which require adjustmentsto reflect only tax exemption, not creditquality. These rates are also inconsistentwith the express intention of Congressthat the adjusted Federal long-term rate

and the long-term tax-exempt rate belower than the Federal long-term rate.

Request for Comments and Summaryof Comments

In response, the IRS published Notice2013–4 (2013–9 IRB 527) on February25, 2013, requesting comments on possi-ble modifications to the method by whichadjusted AFRs and the adjusted Federallong-term rate are determined. The noticesolicited comments on several potentialadjustment factors. One proposal was anadjustment factor based on tax rates, un-der which each adjusted AFR would bethe product of (A) the appropriate AFR,and (B) the excess of (i) one hundredpercent over (ii) a tax rate or a fixedpercentage of a tax rate. Another proposalwas an adjustment factor based on histor-ical data, under which the adjustment fac-tor would be fixed at an amount thatwould produce a spread between Federallong-term rates and adjusted Federal long-term rates equal to the average spreadbetween those rates during the periodfrom 1986 through 2007 (which is the pe-riod before changes in market conditionselevated the yields of many obligations inrelation to U.S. Treasury obligations). Thenotice also requested comments on whetherthe adjusted Federal long-term rate de-scribed in section 382(f)(2) should continueto be determined in the same manner asthe adjusted AFRs described in section1288(b)(1).

Notice 2013–4 provided that, until theTreasury Department and the IRS issuefurther guidance, the adjusted AFRs andthe long-term tax-exempt rate would con-tinue to be calculated using the adjustmentfactor, except that the adjustment factorwould equal one for any month in whichthe adjustment factor would otherwise begreater than one or in which the denomi-nator of the adjustment factor would oth-erwise be less than or equal to zero.

The IRS received two comments inresponse to Notice 2013–4. One com-menter recommended an adjustment fac-tor based on tax rates for purposes ofsection 1288, and made no recommenda-tion regarding section 382. That com-menter suggested that the proper tax rateto use to calculate the adjusted AFRs isthe highest individual tax rate set forth insection 1, increased by the tax rate under


section 1411 applicable to the investmentincome of individuals.

The other commenter recommendedthe use of historical data to determine thelowest individual marginal tax rate neededto attract sufficient investors to clear themarket supply of tax-exempt obligationsfor purposes of section 1288. That com-menter recommended that there be nochange to the calculation of the long-termtax-exempt rate under section 382. In thealternative, the commenter recommendedthat the adjusted Federal long-term ratedescribed in section 382(f) be subject to afloor because the commenter argued thatsection 382 is intended to defer rather thaneliminate net operating losses, and thelower the long-term tax-exempt rate, thegreater the likelihood that net operatinglosses subject to section 382 limitationwill expire before they are used.

Explanation of Provisions

The language and purposes of sections382 and 1288 suggest that AFRs are to beadjusted in the same manner for purposesof both provisions. Implementation ofeach provision requires an adjustment totake into account the effect of tax exemp-tion on market yields. Therefore, underthese proposed regulations, the adjustedFederal long-term rate under section382(f) would continue to be determined inthe same manner as the adjusted AFRsunder section 1288.

The Treasury Department and the IRSrecognize that, to be entirely consistentwith the language and legislative historyof sections 382 and 1288, the adjustedFederal long-term rate and each adjustedAFR should be determined based on thecurrent market yield on a pool of tax-exempt obligations that have terms, fea-tures, and credit quality matching those ofU.S. Treasury obligations, which wouldresult in an adjusted Federal long-termrate or adjusted AFR that is lower than thecorresponding AFR. However, under re-cent market conditions tax-exempt obliga-tions with perceived credit qualities ap-proximating U.S. Treasury obligationsarguably no longer exist. Because of theincreasing spreads between the yields ofU.S. Treasury obligations and other debtinstruments, the yield of a pool of tax-exempt obligations will likely be higherthan the yield of similar U.S. Treasury

obligations and the AFR for the corre-sponding term.

During the period from 1986 to 2007,certain tax-exempt obligations satisfiedthe criteria in the Code and the legislativehistory. As discussed in this preamble, thecurrent adjustment factor is based on theratio of yields on prime, general obliga-tion tax-exempt obligations to yields ofU.S. Treasury obligations with similarmaturities. From 1986 to 2007, that ratio(and, as a result, the ratios of adjustedAFRs and adjusted Federal long-termrates to AFRs) was, on average, approxi-mately equal to one minus 59 percent ofthe maximum individual tax rate undersection 1. That relationship was relativelystable over the period; the ratio of thespread between the yields to the maxi-mum individual tax rate under section 1generally did not vary by more than a fewpercentage points. In the absence of cur-rent market data from tax-exempt obliga-tions and U.S. Treasury obligations withsimilar maturities and similar credit qual-ity, the Treasury Department and the IRSbelieve this historical market data pro-vides the best indication of the effect of atax exemption on market yields.

The Treasury Department and the IRStherefore propose use of this historicalmarket data to create an appropriate ad-justment factor based on individual taxrates. Consistent with a proposal in Notice2013–4 and one commenter’s suggestionregarding section 1288, the proposed ad-justment factor is one minus the productof a tax rate and a fixed percentage. TheTreasury Department would therefore de-termine the adjusted AFRs and the ad-justed Federal long-term rate for eachmonth from the appropriate AFRs for thatmonth using the proposed adjustment fac-tor that results from the following calcu-lation: 100 percent – [(a combined taxrate) � (a fixed percentage)]. Consistentwith both commenters’ suggestions re-garding section 1288, the tax rate is themaximum individual tax rate.

Specifically, the tax rate in the pro-posed adjustment factor is the sum of themaximum individual rate under section 1and the maximum individual rate undersection 1411 for the month to which therate applies. Using current maximum in-dividual tax rates under sections 1 and1411, the combined tax rate in the calcu-

lation would be 43.4 percent, the sum of39.6 percent and 3.8 percent. High-income individuals purchase a large per-centage of municipal bonds because thesepurchasers benefit the most from the taxexemption. While individual and corpo-rate tax rates were relatively stable from1986 to 2007, data analyzed by the Trea-sury Department indicate that the differ-ential between yields on tax-exempt mu-nicipal bonds and comparable U.S.Treasury obligations was significantlymore correlated with the highest individ-ual income tax rates than with corporatetax rates. Thus, an adjustment factor basedon the maximum individual tax rate al-lows a better approximation of themarket-based adjustment that Congressintended than would one based on a cor-porate tax rate. The tax on net investmentincome under section 1411 is included inthe proposed adjustment factor to accountfor the entire rate of federal tax imposedon high-income individuals who hold tax-able obligations.

The fixed percentage is the amount bywhich that combined tax rate must bemultiplied to reflect the historical relation-ship between the maximum tax rate andthe spread between yields of taxable andtax-exempt obligations. The spread is lessthan 100% of the maximum tax rate be-cause, for example, issuers of tax-exemptbonds need to attract purchasers with ef-fective tax rates lower than the maximumindividual tax rate. The fixed percentagein the proposed adjustment factor is 59percent, because the yield on tax-exemptobligations from February 1986 to July2007 was lower than that of comparabletaxable obligations by, on average, 59 per-cent of the maximum individual rate ineffect under section 1.

Therefore, the adjustment factor undercurrent tax rates would be 74.39 percent,the result of subtracting 25.61 percent (theproduct of 43.4 percent and 59 percent)from 100 percent. If an AFR for a givenmonth were 5 percent, under current taxrates, the corresponding adjusted AFRwould be 3.72 percent: the product of74.39 percent and 5 percent. If that 5percent AFR were the Federal long-termrate for debt instruments with annual com-pounding, the adjusted Federal long-termrate under section 382 would likewise be3.72 percent.


The proposed regulations do not adoptthe suggestion of one commenter that theadjusted Federal long-term rate describedin section 382(f) be subject to a floorbecause that would be inconsistent withthe primary purpose of section 382. Theprimary purpose of section 382 is to pre-serve the integrity of the carryover provi-sions by discouraging tax-motivated cor-porate acquisitions while allowing thecarryover provisions to perform their in-tended averaging function. To accomplishthis purpose, section 382 seeks to limit theuse of pre-change losses by an acquiringcorporation to no more than the loss cor-poration’s ability to use such losses, withthat limit being determined by multiplyingthe long-term tax-exempt rate—a rate be-low the Federal long-term rate—by thevalue of the loss corporation. The Confer-ence Report for the Tax Reform Act of1986 explains:

The use of a rate lower than thelong-term Federal rate is necessaryto ensure that the value of NOLcarryforwards to the buying corpo-ration is not more than their value tothe loss corporation. Otherwisethere would be a tax incentive foracquiring loss corporations. If theloss corporation were to sell its as-sets and invest in long-term Trea-sury obligations, it could absorb itsNOL carryforwards at a rate equalto the yield on long-term govern-ment obligations. Since the pricepaid by the buyer is larger than thevalue of the loss company’s assets(because of the value of NOL carry-forwards are taken into account), ap-plying the long-term Treasury rate tothe purchase price would result infaster utilization of NOL carryfor-wards by the buying corporation.

2 H.R. Rep. No. 99–841 (Conf. Rep.),99th Cong., 2d Sess. II–188 (1986)(1986–3 CB (Vol. 4) 1, 188).

Imposing a floor on the adjusted Fed-eral long-term rate, and thereby on thelong-term tax-exempt rate, would reducethe effect of the mechanism Congress es-tablished to ensure that the value of netoperating loss carryforwards to the acquir-ing corporation is not more than the valueof those carryforwards to the loss corpo-ration. Moreover, as a matter of statutoryinterpretation, an upward adjustment ofthe adjusted Federal long-term rate to

comply with a fixed minimum level woulddisregard the express direction of Con-gress to determine the adjusted Federallong-term rate based on the Federal long-term rate determined under section1274(d), which is not subject to a floor,with adjustments to take into account thedifferences between rates on taxable andtax-exempt obligations. Further, the legis-lative history of section 382(f) suggeststhat Congress intended that the adjustedFederal long-term rate be determined in amanner similar to the adjusted AFR undersection 1288.

The tax rate used to determine adjustedAFRs under these proposed regulationsdiffers from the tax rate used to determinethe interest rate on demand deposit secu-rities under the State and Local Govern-ment Series (SLGS). Demand depositSLGS securities are one-day certificatesof indebtedness that are automaticallyrolled over each day until the holder re-quests redemption. See 31 CFR § 344.7.The interest rate on the securities is basedon yields of 13-week Treasury bills, witha number of adjustments. Among the ad-justments is multiplying the annualizedTreasury bill yield by the excess of oneover the estimated marginal tax rate ofpurchasers of tax-exempt bonds. That es-timated marginal tax rate is publishedfrom time to time in the Federal Registerand is currently 39.6 percent. The Trea-sury Department and the IRS requestcomments on whether the interest rate onSLGS should reflect the same correctionfor tax exemption as the adjusted AFRs(the product of the fixed percentage andthe combined tax rate).

Proposed Effective/Applicability Date

These regulations are proposed to ap-ply to calendar months beginning after thedate of publication of the Treasury deci-sion adopting these rules as final regula-tions in the Federal Register.

Special Analyses

It has been determined that this noticeof proposed rulemaking is not a signifi-cant regulatory action as defined in Exec-utive Order 12866, as supplemented byExecutive Order 13563. Therefore, a reg-ulatory assessment is not required. It alsohas been determined that section 553(b) of

the Administrative Procedure Act (5U.S.C. chapter 5) does not apply to theseregulations, and because the regulationsdo not impose a collection of informationon small entities, the Regulatory Flexibil-ity Act (5 U.S.C. chapter 6) does not ap-ply. Pursuant to section 7805(f) of theCode, this notice of proposed rulemakinghas been submitted to the Chief Counselfor Advocacy of the Small Business Ad-ministration for comments on its impacton small business.

Comments and Public Hearing

Before these proposed regulations areadopted as final regulations, considerationwill be given to any written (a signed orig-inal and eight (8) copies) or electronic com-ments that are submitted timely to the IRSas prescribed in this preamble under the “Ad-dresses” heading. The Treasury Departmentand the IRS request comments on all aspectsof the proposed rules. All comments will beavailable for public inspection and copying atwww.regulations.gov or upon request.

A public hearing has been scheduledfor June 24, 2015, at 10:00 a.m., in theIRS Auditorium, Internal Revenue Ser-vice, 1111 Constitution Avenue, N.W.,Washington, DC. Due to building securityprocedures, visitors must enter throughthe Constitution Avenue entrance. In ad-dition, all visitors must present photoidentification to enter the building. Be-cause of access restrictions, visitors willnot be admitted beyond the immediateentrance area more than 30 minutes beforethe hearing starts. For information abouthaving your name placed on the buildingaccess list to attend the hearing, see the“FOR FURTHER INFORMATIONCONTACT” section of this preamble.

The rules of 26 CFR 601.601(a)(3) ap-ply to the hearing. Persons who wish topresent oral comments at the hearing mustsubmit written (signed original and eight(8) copies) or electronic comments and anoutline of the topics to be discussed andthe time to be devoted to each topic byJune 1, 2015. A period of 10 minutes willbe allotted to each person for makingcomments. An agenda showing the sched-uling of the speakers will be preparedafter the deadline for receiving outlineshas passed. Copies of the agenda will beavailable free of charge at the hearing.



The principal authors of the proposedregulations are Jason G. Kurth, IRS Officeof the Associate Chief Counsel (FinancialInstitutions and Products) and William W.Burhop, IRS Office of the Associate ChiefCounsel (Corporate). However, other per-sonnel from the Treasury Department andthe IRS participated in their development.

* * * * *

Proposed Amendments to theRegulations

Accordingly, 26 CFR part 1 is pro-posed to be amended as follows:

PART 1–INCOME TAXES

Paragraph 1. The authority citation forpart 1 is amended by adding entries innumerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *Section 1.382–12 also issued under 26

U.S.C. 382(f) and 26 U.S.C. 382(m). * * *Section 1.1288–1 also issued under 26

U.S.C. 1288(b). * * *Par. 2. Section 1.382–1 is amended by

revising the introductory text and addingan entry for § 1.382–12 to read as follows:

§ 1.382–1 Table of contents.

This section lists the captions that ap-pear in the regulations for §§ 1.382–2through 1.382–12.

* * * * *

§ 1.382–12 Determination of adjustedFederal long-term rate.

(a) In general.(b) Adjusted Federal long-term rate.(c) Adjustment factor.(d) Effective/applicability date.

Par. 3. Section 1.382–12 is added toread as follows:

§ 1.382–12 Determination of adjustedFederal long-term rate.

(a) In general. The long-term tax-exempt rate for an ownership change isthe highest of the adjusted Federal long-term rates in effect for any month in the3-calendar-month period ending with thecalendar month in which the change dateoccurs. For purposes of the previous sen-tence, the adjusted Federal long-term rateis the Federal long-term rate determinedunder section 1274(d) (without regard toparagraphs (2) and (3) thereof), adjustedfor differences between rates on long-termtaxable and tax-exempt obligations. TheSecretary calculates the adjusted Federallong-term rate as provided in paragraph(b) of this section. The Internal RevenueService publishes the long-term tax-exempt rate and the adjusted Federal long-term rate for each month in the InternalRevenue Bulletin (see § 601.601(d)(2)(ii)of this chapter).

(b) Adjusted Federal long-term rate.The adjusted Federal long-term rate for acalendar month is the product of the Fed-eral long-term rate determined under sec-tion 1274(d) for that month, based on an-nual compounding, multiplied by theadjustment factor described in paragraph(c) of this section.

(c) Adjustment factor. The adjustmentfactor is a percentage equal to—

(1) The excess of 100 percent, over(2) The product of—(i) 59 percent, and(ii) The sum of the maximum rate in

effect under section 1 applicable to indi-viduals and the maximum rate in effectunder section 1411 applicable to individ-uals for the month to which the adjustedapplicable Federal rate applies.

(d) Effective/applicability date. Therules of this section apply to the determi-nation of the long-term tax-exempt rateand the adjusted Federal long-term rateduring calendar months beginning afterthe date of publication of the Treasury

decision adopting these rules as final reg-ulations in the Federal Register.

Par. 4. Section 1.1288–1 is added toread as follows:

§ 1.1288–1 Adjustment of applicableFederal rate for tax-exempt obligations.

(a) In general. In applying section 483or section 1274 to a tax-exempt obliga-tion, the applicable Federal rate is ad-justed to take into account the tax exemp-tion for interest on the obligation. Foreach applicable Federal rate determinedunder section 1274(d), the Secretary com-putes a corresponding adjusted applicableFederal rate by multiplying the applicableFederal rate by the adjustment factor de-scribed in paragraph (b) of this section.The Internal Revenue Service publishesthe applicable Federal rates and the ad-justed applicable Federal rates for eachmonth in the Internal Revenue Bulletin(see § 601.601(d)(2)(ii) of this chapter).

(b) Adjustment factor. The adjustmentfactor is a percentage equal to–

(1) The excess of 100 percent, over(2) The product of–(i) 59 percent, and(ii) The sum of the maximum rate in

effect under section 1 applicable to indi-viduals and the maximum rate in effectunder section 1411 applicable to individ-uals for the month to which the adjustedapplicable Federal rate applies.

(c) Effective/applicability date. Therules of this section apply to the determi-nation of adjusted applicable Federal ratesduring calendar months beginning afterthe date of publication of the Treasurydecision adopting these rules as final reg-ulations in the Federal Register.

John M. DalrympleDeputy Commissioner for



Definition of TermsRevenue rulings and revenue procedures(hereinafter referred to as “rulings”) thathave an effect on previous rulings use thefollowing defined terms to describe theeffect:

Amplified describes a situation whereno change is being made in a prior pub-lished position, but the prior position isbeing extended to apply to a variation ofthe fact situation set forth therein. Thus, ifan earlier ruling held that a principle ap-plied to A, and the new ruling holds thatthe same principle also applies to B, theearlier ruling is amplified. (Compare withmodified, below).

Clarified is used in those instanceswhere the language in a prior ruling isbeing made clear because the languagehas caused, or may cause, some confu-sion. It is not used where a position in aprior ruling is being changed.

Distinguished describes a situationwhere a ruling mentions a previously pub-lished ruling and points out an essentialdifference between them.

Modified is used where the substanceof a previously published position is beingchanged. Thus, if a prior ruling held that aprinciple applied to A but not to B, and thenew ruling holds that it applies to both A

and B, the prior ruling is modified becauseit corrects a published position. (Comparewith amplified and clarified, above).

Obsoleted describes a previously pub-lished ruling that is not considered deter-minative with respect to future transac-tions. This term is most commonly used ina ruling that lists previously published rul-ings that are obsoleted because of changesin laws or regulations. A ruling may alsobe obsoleted because the substance hasbeen included in regulations subsequentlyadopted.

Revoked describes situations where theposition in the previously published rulingis not correct and the correct position isbeing stated in a new ruling.

Superseded describes a situation wherethe new ruling does nothing more thanrestate the substance and situation of apreviously published ruling (or rulings).Thus, the term is used to republish underthe 1986 Code and regulations the sameposition published under the 1939 Codeand regulations. The term is also usedwhen it is desired to republish in a singleruling a series of situations, names, etc.,that were previously published over a pe-riod of time in separate rulings. If the newruling does more than restate the sub-

stance of a prior ruling, a combination ofterms is used. For example, modified andsuperseded describes a situation where thesubstance of a previously published rulingis being changed in part and is continuedwithout change in part and it is desired torestate the valid portion of the previouslypublished ruling in a new ruling that isself contained. In this case, the previouslypublished ruling is first modified and then,as modified, is superseded.

Supplemented is used in situations inwhich a list, such as a list of the names ofcountries, is published in a ruling and thatlist is expanded by adding further namesin subsequent rulings. After the originalruling has been supplemented severaltimes, a new ruling may be published thatincludes the list in the original ruling andthe additions, and supersedes all prior rul-ings in the series.

Suspended is used in rare situations toshow that the previous published rulingswill not be applied pending some futureaction such as the issuance of new oramended regulations, the outcome ofcases in litigation, or the outcome of aService study.

AbbreviationsThe following abbreviations in currentuse and formerly used will appear in ma-terial published in the Bulletin.

A—Individual.Acq.—Acquiescence.B—Individual.BE—Beneficiary.BK—Bank.B.T.A.—Board of Tax Appeals.C—Individual.C.B.—Cumulative Bulletin.CFR—Code of Federal Regulations.CI—City.COOP—Cooperative.Ct.D.—Court Decision.CY—County.D—Decedent.DC—Dummy Corporation.DE—Donee.Del. Order—Delegation Order.DISC—Domestic International Sales Corporation.DR—Donor.E—Estate.EE—Employee.E.O.—Executive Order.ER—Employer.

ERISA—Employee Retirement Income Security Act.EX—Executor.F—Fiduciary.FC—Foreign Country.FICA—Federal Insurance Contributions Act.FISC—Foreign International Sales Company.FPH—Foreign Personal Holding Company.F.R.—Federal Register.FUTA—Federal Unemployment Tax Act.FX—Foreign corporation.G.C.M.—Chief Counsel’s Memorandum.GE—Grantee.GP—General Partner.GR—Grantor.IC—Insurance Company.I.R.B.—Internal Revenue Bulletin.LE—Lessee.LP—Limited Partner.LR—Lessor.M—Minor.Nonacq.—Nonacquiescence.O—Organization.P—Parent Corporation.PHC—Personal Holding Company.PO—Possession of the U.S.PR—Partner.PRS—Partnership.

PTE—Prohibited Transaction Exemption.Pub. L.—Public Law.REIT—Real Estate Investment Trust.Rev. Proc.—Revenue Procedure.Rev. Rul.—Revenue Ruling.S—Subsidiary.S.P.R.—Statement of Procedural Rules.Stat.—Statutes at Large.T—Target Corporation.T.C.—Tax Court.T.D.—Treasury Decision.TFE—Transferee.TFR—Transferor.T.I.R.—Technical Information Release.TP—Taxpayer.TR—Trust.TT—Trustee.U.S.C.—United States Code.X—Corporation.Y—Corporation.Z—Corporation.

Bulletin No. 2015–11 March 16, 2015i

Numerical Finding List1

Bulletin 2015–1 through 2015–11

Announcements:

2015-1, 2015-11 I.R.B. 7582015-2, 2015-3 I.R.B. 3242015-3, 2015-3 I.R.B. 3282015-4, 2015-5 I.R.B. 5652015-5, 2015-7 I.R.B. 6022015-6, 2015-8 I.R.B. 6852015-8, 2015-9 I.R.B. 6982015-10, 2015-11 I.R.B. 758

Proposed Regulations:

REG-109187-11, 2015-2 I.R.B. 277REG-132751-14, 2015-2 I.R.B. 279REG-145878-14, 2015-2 I.R.B. 290REG-153656-3, 2015-5 I.R.B. 566REG-102648-15, 2015-10 I.R.B. 745REG-136018-13, 2015-11 I.R.B. 759REG-143416-14, 2015-11 I.R.B. 757

Notices:

2015-1, 2015-2 I.R.B. 2492015-2, 2015-4 I.R.B. 3342015-3, 2015-6 I.R.B. 5832015-4, 2015-5 I.R.B. 4072015-5, 2015-5 I.R.B. 4082015-6, 2015-5 I.R.B. 4122015-7, 2015-6 I.R.B. 5852015-8, 2015-6 I.R.B. 5892015-9, 2015-6 I.R.B. 5902015-11, 2015-8 I.R.B. 6182015-15, 2015-9 I.R.B. 6872015-12, 2015-8 I.R.B. 7002015-13, 2015-10 I.R.B. 7222015-14, 2015-10 I.R.B. 7222015-16, 2015-10 I.R.B. 7322015-19, 2015-9 I.R.B. 6902015-20, 2015-11 I.R.B. 754

Revenue Procedures:

2015-1, 2015-1 I.R.B. 12015-2, 2015-1 I.R.B. 1052015-3, 2015-1 I.R.B. 1292015-4, 2015-1 I.R.B. 1442015-5, 2015-1 I.R.B. 1862015-6, 2015-1 I.R.B. 1942015-7, 2015-1 I.R.B. 2312015-8, 2015-1 I.R.B. 2352015-9, 2015-2 I.R.B. 2492015-10, 2015-2 I.R.B. 2612015-12, 2015-2 I.R.B. 2652015-13, 2015-5 I.R.B. 4192015-14, 2015-5 I.R.B. 4502015-15, 2015-5 I.R.B. 564

Revenue Procedures—Continued:

2015-16, 2015-7 I.R.B. 5962015-17, 2015-7 I.R.B. 5992015-18, 2015-8 I.R.B. 6422015-19, 2015-8 I.R.B. 6782015-20, 2015-9 I.R.B. 6942015-22, 2015-11 I.R.B. 754

Revenue Rulings:

2015-1, 2015-4 I.R.B. 3312015-2, 2015-3 I.R.B. 3212015-3, 2015-6 I.R.B. 5802015-4, 2015-10 I.R.B. 743

Treasury Decisions:

9707, 2015-2 I.R.B. 2479708, 2015-5 I.R.B. 3379709, 2015-7 I.R.B. 5939710, 2015-8 I.R.B. 6039711, 2015-11 I.R.B. 7489712, 2015-11 I.R.B. 750

1A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2014–27 through 2014–52 is in Internal Revenue Bulletin2014–52, dated December 28, 2014.

March 16, 2015 Bulletin No. 2015–11ii

Finding List of Current Actions onPreviously Published Items1

Bulletin 2015–1 through 2015–11

Announcements:

2010-3Amplified byAnn. 2015-3, 2015-3 I.R.B. 328

Revenue Procedures:

2014-01Superseded byRev. Proc. 2015-01, 2015-01 I.R.B. 1










2011-14Modified byRev. Proc. 2015-12, 2015-2 I.R.B. 265


Revenue Procedures—Continued:

2011-14Amplified byRev. Proc. 2015-13, 2015-5 I.R.B. 419

2011-14Clarified byRev. Proc. 2015-13, 2015-5 I.R.B. 419

1997-27Clarified byRev. Proc. 2015-13, 2015-5 I.R.B. 419







Revenue Rulings:

92-19Supplemented byRev. Rul. 2015-02, 2015-3 I.R.B. 321

Notices:

2013-01Modified byNotice 2015-20, 2015-11 I.R.B. 754

2013-01Superseded byNotice 2015-20, 2015-11 I.R.B. 754

1A cumulative list of current actions on previously published items in Internal Revenue Bulletins 2014–27 through 2014–52 is in Internal Revenue Bulletin 2014–52, dated December 28,2014.

Bulletin No. 2015–11 March 16, 2015iii

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